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Ahmed Ismail Abdi
Keele Number: 08014130
Business Management and HRM
HRM30008
Issues and Themes in the Contemporary Management of Labour
Essay
To what extent have the competitive pressures of the global economyimpacted on organizations and their management of labour? Discuss,with reference to high performance workplaces and changing forms of
work organization.
Williams and Adam Smith (2006, p. 51) state that changes in the economic context exerts a
profound influence on employment relations as organisations aim to maintain their
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competitiveness". This statement illustrates the importance of the need of organisations to
remain competitive in the face of a 'new global economy' that has come about after the 1980's
and 1990's, or as Bach (2002) put it 'the era of global economic transition'. This paper will
therefore illustrate how different work organizations have resulted from competitive
pressures brought by globalization and how these new work organizations have resulted in
negative effects on the management of labour. A significant number of surveys and research
literature such as Cully et al. (1999)will be used to illustrate the findings presented below;
To understand the new economy of the 1980s, it is important to assessglobalization and its
effects on changing the worldwide global product markets. For example, the
deindustrialization of Britain's manufacturing sector which saw the decline of previously
stable industries such as coal mining, steel and iron making and shipbuilding illustrates how
competitive pressures has affected whole industries and nations. Salomon (2002) states that
firms who previously used to look towards 'British labour' for such manufacturing services
are now seeking to outsource these jobs abroad in order to cut costs. The implications of this
on the management of labour will be discussed in greater detail further below; but it is clear
that the industrial economy of Britian that "employed a large number of highly unionised
workers on full-time contracts" would begin opposing mainstream recognition of unions and
encourage HR managers to adopt flexible working practises and employ an increasing
amount of part-time workers who are less trained, less-skilled and have low job statuses and
job security (Beynon 2002, p. 37). The following table has been adapted from Cully et al.
(1999) in his landmark survey on the changing state of UK's workplaces.
Competitive
pressures
therefore can
be stated to
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arise from the establishment of a global 'new economy'. Williams and Adam-Smith (2006)
explain the features of this new economy as weakening of the employment relationship
through offshoring practises, union de-recognition and the influences of MNC's on the
adoption of corporatism policies by world-wide governments, but also as being characterised
by a greater number of employees working without one at all with the rise of 'the autonomous
self-employed and the independent free-lance contractors'. Nolan and Wood (2003) find that
during the 1980's, the number of people who were self-employed had grown substantially
from 5% to 10% in Britain alone. This growth was encouraged and allowed to thrive by
successive British governments who saw small businesses as a solution to 'the competitive
pressures that enveloped the stagnant UK economy' (Williams and Adam-Smith 2006). In
fact, the need for UK businesses to become more competitive had, according to Nolan and
Wood (2003), forced them to cut back employees and adopt flexible working practices which
enabled a surplus of workers in the labour market, among them young and vibrant workers
who chose the option of becoming self-employed in a climate where there was a lack of
alternative opportunities.
Cully et al. (1999) presents evidence on how firms reacted to increased competitive pressures
by adopting cost-cutting measures that included on how they managed their employees. In the
case for the UK, Frenkel (2003) and Cully et al. (1999) discovered an increased use of sub-
contracting arrangements as a means of managing labour and cutting down on costs. The
following statement illustrates the changes argued by the aforementioned researchers;
Of all workplaces in Britian that were five years or more older, 28 per cent had contracted
out some services which five years earlier had been done by direct employees of the
workplace (or parent organizations). This proportion was higher in the public sector 36
per cent compared with 25 per cent in the private sector
Cully et al. 1999
Cully et al. (1999) further explains this form of managing labour as emphasizing on the
workforce being hired on short-term contracts through third parties. This leaves employees
vulnerable and exposed to management interests, whereby Beynon (1997, p.33) put it that
these employees "are paid by the company and to all intents and purposes are employees; but
the companies do not recognise this relationship" (see Table 2 in Appendix A). This furtherresult in the workforce obliged to bear most of the risks and costs of employment, as they are
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no longer able to enter into a direct and long- term relationship with their employers.
O'Connell Davidson (1994) demonstrates this impact through a case study on a milk
company that sub-contracted it's delivery staff to operate as self-employed contractors. This
not only extended managerial control -as workers were "under some very specific controls
over how they must organise their work" (O'Connell Davidson 1994, p. 29) - but it also
allowed them to reduce costs in terms of eliminating pension contributions and National
Insurance payments by the company leading to major cost savings.
Nevertheless, this paper does find that although self-employed workers have increased
significantly during the 1980's, it has not carried forward enough momentum into the 1990's -
whereby it only increased a further 2% during this whole decade (Nolan and Wood, 2003).
Therefore, while there are valid arguments on how competitive pressures have forced
increased number of workers to taking up the option of becoming self-employed, it is
necessary to state that the employment relationship within the workplace remains the most
important means of organising work in this contemporary economy. Therefore, in support of
Gearys (2002) statement that the competitive nature of the new economy has affected the
nature of employee relationships in terms of the way whole organisations work, the following
section will look into the two most prevalent forms of work organizations to emerge; high
performance workplace systems and cost minimization techniques which include supply
chains, just-in-time/total quality management and offshoring.
High Performance Workplace Systems
During the 1990s, British firms was stated to have moved away from the external fit model
of HR practises which characterized the economic changes and organizational upheavals of
the 1980s. Schuler and Jackson (1987) who argued on the merits of external fit clarified
that British companies sought to align HR policies to the external product markets in order to
become more competitive and meet the changing demands that the new products markets
had placed on these firms. In order to link such policies to these external markets, firms
therefore needed to adopt flexible working practises that had considerable proven experience
in cutting back costs and transforming labour from being indispensible to becoming
disposable (Kochan and Ostermann, 1994). However, during the 1990s, new managerial
thinking supported by Sisson (1993) and MacDuffie (1995) argued that firms have moved to
adopt aresource-based theory whereby firms derive competitive advantage by focusing ondeveloping unique, internal resources. According to MacDuffie (1995), these developments
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had taken the form an internal fit strategy that focused on setting and implementing a
coherent bundle of HR practises that will gather together complementary HR practises so as
to form high performance work systems.
High performance work systems are claimed to not just better manage employees but to
actually improve organizational performance. Applebaum et al. (2002) referenced a number
of US studies that discovered a positive relationship between coherent bundles of HR
practises and firm performance and profitability. For example, in one of these studies,
Applebaum et al. (2002) surveyed three US plants and found out that the three main features
of high performance work systems; team working, employee participation and
sophisticated selection, training and appraisal systems were all present and integrated
together to help improve organizational performance outcomes and elevate it over those of
traditional work organizations. However, there are arguments forwarded by famous quality
gurus such as Deming (1986) and Crosby (1995) that stated high performance work systems
were mechanical and inflexible routes for production management and that such systems are
better termed as high-commitment managementorhigh-involvement work practises but as
Butleret al. (2004) stated, the significance of these differences in terms is simple semantics;
a twist of language and that the terms, more or less, mean the same (see Table 5 in Appendix
B).
High performances workplace systems have been thus implemented as a new form of work
organization that increase employment and contribute to organizational effectiveness and
competitiveness. In fact, it is important to state that while some academicians have been
critical of the impact HPWSs have had on organizational performance, it has now been
ratified as common consensus that there is a universal link between organizational
competitiveness and HPWSs (Whitfield and Poole, 1997). This is despite, no evidence to
suggest how such a set of management initiatives can bring about performance outcomes,
with no data so far indicating a direct relationship between the two (Sisson and Purcell,
2010). Furthermore, there is also the increasingly visible aspect of casualty that is occurring
in these same British workplaces which defies the heralded values of HPWSs on increased
worker commitment and involvement (Truss, 2001). However, this issue will need to be
further assessed below; but it seems that for now HPWSs have had an impact on
organizational performance..Therefore, while the role of HPWSs has been clarified, it
remains to be seen to what extent have UK firms adopted the practises of HPWS in Britain
today.
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HPWSs are highly effective when they are implemented together as a bundle of
complementary, overlapping and highly-related practises. Godard and Delaney (2001) state
that there many studies that indicate that this is very hard to implement and sustain, while
Pfeffer and Veiga (1999) argue that where British firms do implement such practises, they are
unable to find and match a suitable set of practises together. On the other hand, Whitfield
(1998) and Pil and MacDuffie (1996) both state that the transformative capacities that was
brought about by new work organizations such as HPWSs, teamworking and quality circles
have created a new industrial relations. Whereas Pfeffer and Veiga (1999) argue that this is
not the case, as Britain while imitating the Japanization model of teamworking and quality
and the American systems of HPWS, have failed to absorb the national institutional factors
that have made these work systems a success but are rather picking and choosing the
aspects of these systems of which they find attractive. The empirical consideration of these
contradictions will be assessed below;
Up until late 1980s and early 1990s, findings from the UK Workplace Industrial Relation
Survey (WIRS) suggested that new work practises were not widely diffused and have not
managed to penetrate the UK workplace to a great extent. For example, Edwards et al. (2003)
claims that the 1990 WIRS survey shows that only 2 per cent of the total workplace
establishments in Britain allowed for the existence of semi-autonomous work groups.
Nevertheless, Cully et al. (1999) found out that the proportion of workplaces that use
problem-solving groups grew significantly to 38 per cent in 1998, while the number of
establishments that had at least part of their employees work in teams numbered at 83 per
cent. However, these evidences cited by Whitfield (1998) and Pil and MacDuffie (1996) can
in fact be called into question, as when stricter definitions of the terms such as team working,
semi-autonomous work groups were adopted, the overall percentage fell back to 35 per cent
and when one further criteria was added (whether teams can elect their own leaders) which
was generally found in the national institutions from which these systems were borrowed, the
figure was dramatically reduced to 3 per cent (Cully et al. 1999).
Another key feature of HPWS is the presence of quality circles (QCs) which were
implemented after British organizations regarded the need to meet competitive pressures
required value-added HR practises whereby employees are encouraged to become more
involved. The Employment in Britain Survey stated that 20 per cent of employees in British
workplaces participated in quality circles and that more importantly, those who did join such
group claimed to be empowered by the ability to have a say in the way in which their work
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was organized (Gallie et al. 1998). This therefore clearly indicates how quality circles as a
part of HPWSs can be highly effective in promoting employees sense of involvement.
However, it seems to significant to the thesis of this paper to present not only the current
coverage of HPWSs in Britain in order to assess how competitive pressures had affected the
adoption of new work organizations, but to also do a cross-analysis of it in comparison to
other countries. The European Foundation for the Improvement of Living and Working
Conditions (1997) did a survey on the adoption of quality circles and its essential feature of
consultative groups; either temporarily or permanently and contrasted the scope and impact
of these new work organizations on various nations within the EU including Britain (see
Table 6 below).
The study above indicates how Britain fares in terms of coverage, scope and autonomy and a
few interesting analysis can be drawn. Edwards et al. (2003) stated that this study indicated
that Britain had a consistent coverage of HPWSs in terms consultative participation,
whereby managers encourage workers to make their own views known on work-related
matters but nevertheless retains the right to make decisions on whether to take action or not.
In contrast, delegative participation allows management to grant employees increased
discretion and autonomy to work without recourse to management for decision-making
(Edwards et al. 2003; Geary and Sisson, 1994). In this case, Britain averaged 41 per cent for
permanent consultative groups in either word, quality circles (Geary and Sisson, 1994)
which represents a significant increase over other countries by more than 10 per cent. In
establishing teamworking or group delegation, firms averaged around 37% around the same
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of the average rate for the ten sample countries. Nevertheless, as mentioned before, a high
adoption of certain work organizations does not necessarily equal scope or autonomy and
thus, we will present a second analysis to measure the intensity of principles adopted from
HPWSs.
Britain averaged lower than the average country in providing for high intense work
practises and rather settled for more limited scope and autonomy in their implementation of
HPWS. This final analysis presented by the European Foundation (1997) of a very minimal
adoption (16%) of proper high performance workplace systems indicates that Britain as well
as other countries tend to cite the adoption of new work organizations as indicating a new
economy and that wide coverage of such systems are evidence of this statement. However,
the reality as indicated by the numerous literature and research studies mentioned above is
that despite wide presence of HPWSs systems, British workplace environment rarely adopt
the key aspects of such systems which include giving greater voice to employees and
providing for greater autonomy and discretion to workers so that they become more involved
and committed to improving organizational competitiveness. Instead, many firms
complement the ineffective use of HPWSs with a industry-wide adoption of policies such as
casualization through cost minimizing techniques such as the use of long supply chains, just-
in-time methods and off shoring activities all of which allow for greater management control
and the increased cheapening of the global workforce (Guest, 2001a).
Cost Minimizing Work Organizations
The impact of globalization on work organizations has led to an increase in off shoring
practises by companies who aim to gain competitive advantage by cutting down on labour
and shifting overseas. According to Buxey (2000), many firms attempt this in order to
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increase organizational competitiveness, most managers are willing to reduce either the
number of their staff or the income expenses by outsourcing jobs. This form of off-shoring is
usually termed as outsourcing when jobs are moved abroad (Gomez-Meija et al. 2010). The
competitive pressures that have resulted from globalization had resulted in domestic firms in
developed countries such as the UK to recognize the threat of global competition from firms
who are willing to move their operations to places where labour costs are lower.
Off-shoring has had the most significant impact on front-line workers such as those in call
centres and computer engineering sectors. Korczynski et al. (2000) examined this impact and
further classified the front-line workers into two; knowledge workers such as those that
work in the financial services, and less skilled mass-customized service workers such as
those involved in the call centres. The author went on to state that in these cases, the former
was likely to find significant benefits and higher job satisfaction and are willing to migrate to
other countries if their management were to request them to do so. However, in terms of
those less-skilled front-line workers, lower job satisfaction and high volatility in labour
turnover has been observed despite claims by MNCs that off-shoring allows the opportunity
to bring job growth and higher job expectations for workers in host countries.
This fraction of the global labour force, the workers who are merely warm bodies, works on
precarious contracts for extremely low rewards. Despite their initial transnational mobility,
low pay, antisocial working hours and heavy workloads trap them in place
McDowell et al. (2008)
This argument presented by McDowell et al. (2008) that workers are losing their ability to
harness their collective power in order to improve their working conditions is also critical to
understanding how organizations function today. According to Torrington et al. (2002) firms
that contribute most to the private are multi-national companies or companies that have
decided to take their operations abroad. This form of work organization can be established to
sell goods to new markets or more realistically, utilize various comparative advantages from
different countries in order to maximize effective supply side economics. Sisson and Purcell
(2010) stated that firms that move abroad are large conglomerates that have a diverse range
of business and employ large number of workers in different locations or sites. This thereforefirms to dabble in labour efficiency and employ flexible working practises that will bring
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better productivity to the organization (Geary, 2002). Therefore, the management of long
supply chains illustrate perfectly how cost minimization techniques are affected by the
globalization and the development of a new global economy.
However, it is important to understand that not all forms of work organizations are required
to occur on a global level in order to recognize the impact that competitive pressures brought
on by globalization has had on the development of new work organizations. Storey et al.
(1997) states that it was during the 1980s and early 1990s, that Japanese work systems such
as just-in-time and total quality management were passionately adopted by British
management and the rest of developed world including the USA. These forms of work
organizations which emphasized on flexibility and quality control had a profound impact on
corporate policies including those that fall under HRM. The coverage, scope and impact of
these work systems will be discussed below in terms of how it affected management of
labour and whether it still continues to do so.
Management of Labour and Competitive Pressures
In previous sections, this author has discussed the impact of competitive pressures on how
firms choose to organize their work and labour. However, there is also a direct link between
the effects of organizational competitiveness in the face of globalization and how labour is
managed (Torrington et al. 2008). Firstly, human resource management needs to be
contended with the implications of globalization which include the cheapening of labour
whereby work can easily be offshored to work sites abroad or to different regions in order to
lower labour costs by making them compete with one another (Dimba, 2010). Furthermore,
as firms begin to adopt new methods such as farming out work to subsidiaries and
implementing a flexible and adjustable labour force, there is a necessary need to assess the
role of HRM in todays competitive environment.
International firms have been claimed to decentralize and expand their HR roles thereby
providing autonomy to subsidiaries that base their HR practises on the strategic direction set
by the firm. However, Torrington et al. (2008) claims that while the terminology of
decentralization is used to empower subsidiaries, in reality, most firms establish firm lines of
control and restrict the autonomy of their subsidiaries to set out to implement independent
HR decisions. There have been many examples of this occurring in contemporary society as
firms such as Wal-Mart, Marks and Spencer and McDonalds do not allow their subsidiaries,
suppliers and franchises to recognize trade unions. In fact, these firms prefer to retain strong
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central control over how the supply-chain works and are committed to monitoring every
aspect of their labour management policies. To illustrate this example, Apple widely
considered being the most profitable company in the world has only just recently published
its list of suppliers whereby it was prompted to disclose the working practises of its suppliers
over which Apple had so much control over.
Apple released a list of its major suppliers... accompanied by a report
detailing troubling practices inside many of the technology giants suppliers.
Apple said audits revealed that 93 supplier facilities had records indicating
that over half of workers exceeded a 60-hour weekly working limit. Apple said
108 facilities did not pay proper overtime as required by law. In 15 facilities,
Apple found foreign contract workers who had paid excessive recruitment fees
to labor agencies.
Source: The New York Times (Jan 13, 2012)
The use of such long supply chains has had a highly negative impact on the role of
employees. Edwards et al. (2003) claimed that firms are reluctant to widely adopt the main
features of the knowledge-based, up-skilling techniques pioneered in high performance
workplace systems but rather move their labour workforce abroad where they can gain the
same organizational competitiveness by reducing labour costs and taking advantage of loose
labour regulations in host countries. In support of this statement, Bach (2002, p. 26)
categorically states that the lightly regulated character of the UK economy has encouraged
high levels of inward and outward foreign direct investment whereby it has become more
open with relatively few regulations and ratcheting up competitive pressures. This opening
up of the UK economy goes to better illustrate that international firms are not just looking at
moving to third world countries in order to exploit such opportunities. Bach (2002) further
goes on to state that competitive pressures further increased through the expansion of the
European Single Market, trade liberalization and continuing privatization and deregulation.
The impact of these competitive pressures on the management of labour has been the
casualization of an increasing number of workers, whereby the companies have continued to
indulge in high levels of restructuring whereby their entire labour workforce model has beenbased on temporary labour and part-time workers (see Figure 1.1).
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HPWSs are however not exempt from impacting negatively on the management of labour in
those workplaces that have adopted such practises. As Geary (2002) already stated, HPWSs
are meant to increase employees voice in the workplace, and thus achieve greater employeeinvolvement and commitment. However, Millward et al. (2000) claim that HPWSs are
management-based intitiatives that sought to weaken the influence of trade unions and ensure
that control of the workforce falls under management prerogatives. This is illustrated by
earlier mentioned reluctance of UK firms of adopting the features of HPWSs that allows
teams to gain more autonomy and select their own leaders. Empirical evidence of the impact
of the adoption of HPWSs after the 1980s in terms in worker voice arrangements is
provided in the table below;
12ource: Metcalfe (2003)
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Therefore, in recognizing the limited adoption of the significant features of employee
involvement and decision-making autonomy and the negative impact that MNCs and
international companies have had on the management of the global workforce, the issue of
cost-minimization techniques through flexibility and total quality management may perhaps
indicate a better ideal for the management of labour. This paper will attempt to provide its
final and most significant findings of its comprehensive analysis of changes in the
management of labour by utilizing Cullys (1999) study illustrated in Appendix C as well as
case studies such as Clarks (1995) research into the company Pirellis Greenfield facility in
South Wales.
Clark (1995) for example stated that after the adoption of total quality management in the
firms plants at South Wales, many of the employees expressed optimism, stating that such
methods allowed for the overwhelming support for self-supervision and are strongly
committed to the involvement in the day-to-day management of product quality. However,
such optimism did not last long as it was found out that the system of self-supervision were
quickly limited by management, numerical flexibility rather than task flexibility was
emphasized but most especially workers complained of work intensification and the overall
job satisfaction rates began to drop.
Geary (2002) claims that in systems such as just-in-time and total quality management, work
is highly intensified for individual workers and is more significantly, couched under terms
such a job enrichment and skill development which allows management to increasingly
make workers disciplined. In fact, while it has already been mentioned how long supply
chains have caused work to become Taylorised with no room for employee skill
development, empowerment or autonomy, it can be critically argued that the same issues are
occurring in new work organizations that emphasize on flexibility and the efficient use of
labour. Cully et al. (1999) shows evidence that only 14% of workplaces that implement such
new work organizations guarantee job security or no compulsory redundancy policies. In
fact, management use the opportunities of work reorganizations to limit the exercise of
discretion and increase effort levels, rendering the role of employees as less human and
more as resources. In summary, Guest (2001a, p. 12) pointedly put it as follows;
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What this implies is that management is not doing a very good job of
managing human resources. The popular clich that people are our most
important asset is patently untrue
Therefore, in conclusion, while globalization and the development of a new global economy
has resulted in competitive pressures which forced firms to adopt different work organizations
systems, it remains to be seen whether any of these different work organizations have resulted
in a positive impact on the management of labour. In fact, from HPWSs to the cost
minimization work systems, competitive pressures have allowed management to gain control
over the workforce and limit their ability to actually influence the work system with which
they are involved in. Nevertheless, the continued adoption of cost cutting measures and the
reluctance of HR managers to implement the key features of HPWS which influence
employee involvement in the face of the new global economy, portrays a bleak future
whereby casualization is set to become the norm and issues such as employee skill
development, job security and the right to have autonomy and discretion within the workplace
will become less visible in the continual evolution of new work organizations.
APPENDIX (A)
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APPENDIX (B)
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Table 5: The Lexicon Of High Performance Management
Terminology Studies Dominant EmphasisHigh-performance work
systems
Applebaum et al.
(2000)
Danford et al. (2004)
Farias et al. (1998)
Harley (2002)
Ramsay et al. (2000)
Thompson (2003)
Production
Management
Work
Organization
Employee
Relations
High-performance work
practises
Ashton and Sung (2002)
Lloyd and Payne (2004)High-involvement work
systems
Edwards and Wright
(2001)
Felstead and Gallie
(2002)
Harmon et al. (2003)
High-involvement work
practices
Fuertes and Sanchez
(2004)High-performance practises Goddard (2004)High-involvement
management
Forth and Millward
(2004)High-performance
employment systems
Brown and Reich (1997)
High-commitment
management
Baird (2002)
Whitfield and Poole
(1997)
Source: Adapted from Butleret al. (2004)
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APPENDIX (C)
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